The prospect of an industrial relations shakeup if Labor wins the federal election later this year firmed up this week, with Opposition Leader Bill Shorten signalling an increase in the minimum wage.

Donning the hi-vis yesterday in Melbourne, Shorten derided the current minimum wage in a speech to level-crossing workers, saying it is “very hard to live off”.

He said Labor wants a “living wage” to be the lowest pay rate for Australian workers, without committing to a specific number.

As is usual, unions have supported the principle commitment while employer groups are waxing lyrical about the dangers of lifting wages.

Either way, should Labor want to play a role in lifting the minimum wage, they’ll have to make some significant changes to the current framework, which sees the Fair Work Commission (FWC) review and set the national minimum wage each year.

Shorten has clarified the FWC would still set the minimum wage, but has left the door open to changing what the commission has to take into account when setting the pay rate.

Labor has already committed to interfering with the “independent umpire” set up by the Rudd Government in 2009 by way of its policy to wind back an FWC Sunday penalty rate cut from 2017.

Currently, the FWC is supposed to balance the living standards of low-paid workers with the performance of the Australian economy, terms which delivered a 3.5% increase in the minimum wage last year — a 1.4% increase in real wages.

Labor could also pursue broader changes to the FWC, which have been argued for by the Australian Council of Trade Unions, which says the commission is stacked in favour of employers.

Late last year, Industrial Relations Minister Kelly O’Dwyer appointed a raft of new members to the FWC with professional backgrounds on the employer side of the labour market.

This upset unions, as well as Opposition Industrial Relations Spokesperson Brendan O’Connor, who subsequently told the Press Club he was concerned about the way the commissioners were appointed.

Labor says it will have more to say about its IR framework, including its living wage commitment, before the election.

The party has been on a small-business warpath in recent months, unveiling a number of policies, including sub-contractor protections and unfair contract terms.

But uncertainty over Labor’s IR policy remains a sticking point for small business, many of who would likely need to pay more under its suite of reforms.

Shadow Assistant Treasurer Andrew Leigh has argued better pay for workers will support consumer demand in the coming years and will help to turnaround meagre retail spending.

Figures released yesterday by the ABS showed retail spending grew by just 0.1% month-on-month in January, following a 0.4% decline in December.

While the ongoing housing downturn has been blamed, at least in part, stagnant real wage growth has also been cited as a prominent factor.

Broader FWC reform is also something both sides of the labour market agree is necessary, despite disagreement over how.

Approvals of enterprise bargaining agreements (EBA) have plummeted in recent years. Employer groups blame a difficult approval process, while the FWC itself told Senate Estimates last month that employers aren’t very good at submitting compliant applications.

Officials from the FWC admitted they failed to meet their timeliness benchmarks for EBA applications in 2017-18, managing a median of 76 days (the target was 32).

“The very high proportion of applications that either don’t comply fully with the legislation at the time they’re lodged or at the very least require additional information and inquiries to be made. As a result, those applications take longer to deal with and be processed by the commission,” FWC general manager Bernadette O’Neill told estimates.

Reserve Bank of Australia governor Phillip Lowe is also of the view there’s an issue with real wage growth in the Australian economy, saying this week it is at least partly structural, but also happening in other economies across the world.

SmartCompany is the leading online publication in Australia for free news, information and resources catering to Australia's entrepreneurs, small and medium business owners and business managers.

Monday to Friday, SmartCompany.com.au publishes news, business trends and ideas from around the world, profiles and features, as well as all the latest business, tax, legal, marketing, politics and innovation developments occurring around the country.